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12.07.2022 01:50 PM
US premarket trading on July 12; stocks extend losses

Futures on US stock indices fell on Tuesday after closing Monday's session.in the red. Concerns about slowing global economic expansion have undermined investors' appetite for risk assets. speculators are also bracing for the earnings reporting season, which may bring lots of surprises. The Dow Jones Industrial Average futures declined by 226 or 0.7%. Futures for the S&P 500 and Nasdaq 100 decreased by 0.7% and 0.6%, respectively.

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Investors are unwilling to buy risk assets after stocks failed to rise earlier this week. Traders are revising their portfolios in favor of safe-haven assets such as Treasury bonds and the US dollar. At the time of writing, the 10-year Treasury note yield had dropped by 7 basis points to 2.92%.

The US dollar index, which measures the strength of the greenback against its six major rivals inched up by 0.5% to 108.51. This move pushed the euro closer to parity with the dollar as fears of a recession in Europe have intensified significantly.

Analysts note that the strengthening of the US currency may affect corporate profits in the future. A strong dollar signals uncertainty in the global market, which is a negative factor for US companies and central banks. Market participants will be alert to the new earnings forecasts as companies will have to adjust their profits to interest rates and their further increases. High inflationary pressure forces companies to raise prices for consumers, thereby further fueling inflation. It is happening at a time when there is a high likelihood of a recession in the US next year.

Inflation data will be in the limelight this week. A report on the Consumer Price Index for June is on tap on Wednesday. The CPI index is expected to rise to 8.8% from the May level of 8.6%. The index is likely to jump by 1.1% compared to May. However, there are signs that price pressures at the producer level are stabilizing as commodity prices decline.

A strong labor market also boosts inflation.

Premarket

PepsiCo has already published its earnings report. The snack and beverage company reported a better-than-expected quarterly profit, raising its revenue forecast for the next year. Delta Air Lines and JPMorgan Chase are due to reveal their reports later.

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Technical outlook for S&P 500

The bearish pressure on the index persists. Only after an increase to the $3,835 level, which the index failed to break in the morning, the quotes may rise to $3,872. It will open the way to $3,905 and $3,942. After that, the bears will return to the market again as many traders will rush to close long positions. A more distant target will be the $3,975 level. In case of the pessimistic sentiment and talks about high inflation and recession, along with further rate hikes, the risk-off sentiment will intensify. In this case, the index may slide to the nearest support level of $3,788 and to $3,744. At the level of $3,704, buyers will try to regain the upper hand.

Jakub Novak,
Analytical expert of InstaForex
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